Starbucks raising wages and prices

Consumers don't seem to exhibit much price resistance when it comes to coffee

ConsumerAffairs' founder and former editor, Jim Hood formerly headed Associated Press Broadcast News, directing coverage of major news events worldwide. He also served as Senior Vice President of United Press International and was the founder and editor of Zapnews, a newswire service for radio and television.
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Coffee seems to be one of those treasured commodities that's not much affected by pricing. With the average Starbucks latte going for $3.78, according to the Fiscal Times, you can't say coffee aficionados are cheap.

Many are like an unnamed New Jersey consumer who was so thrilled by her morning cup of Joe she forgot to leave us her name. "I love the drinks.They are top of the line. ... As for the food I would consider Starbucks to be the most recommended of all the places i have visited to dine," she said, attaching a photo of what she said was her most recent concoction (right).

But the lowly latte will soon pass the magic $4 mark in many locations, as Starbucks implements price hikes averaging 30 cents or so. You might remember that, not too long ago, motorists swooned at the notion of paying $4 for a gallon of gas, but coffee -- that's another matter.

More valuable than gas

In fact, Starbucks customers like Kelley of Altamonte Springs, Fla., are willing to forgive a wide range of sins. "I truly enjoy the Starbucks experience. I'm a huge coffee fan and love your atmosphere and your employees are great however, your cups leak," she said in a recent ConsumerAffairs review.

"I mainly stop into your store in Winter Park, FL on my way to my office in the mornings. When I do stop in I'm dressed for work. Inevitably your cups leak around the lid. I've smartened up and now hold a napkin up under the lip of the lid but honestly, as much a we pay for a regular cup of Joe we shouldn't have to worry about the lid leaking on our work clothes," Kelley argued.

Valerie's latte (consumer submission)
Valerie of Bloomfield, N.J., is also concerned about the cups -- not their viscosity but their net content. She would like to see more liquid for her lucre (photo at right).

"I went to Starbucks to buy my favorite latte as a hot beverage using my ceramic reusable mug. The line was long but moved quickly. When I received my beverage I was surprised to see the mug only partially filled," Valerie said. "I didn't have time to ask for a replacement because I had to go to work. I didn't drink any of it until I arrived at work and by then it had shrunk to half the size of the mug."

Usual reasons

Starbucks is being pretty open about the reasons behind the price increase. Besides the usual rising costs of business -- rent, raw materials, etc. -- the ubiquitous retailer is giving its employees wage hikes of five to fifteen percent.

The company says the market for skilled baristas and other counter technicians is tight, and it doesn't want to lose any of its treasured employees.

OK. But financial analysts note that retailers around the U.S. are shivering at the thought of a federally mandated minimum wage of $10.25 by 2020 and are beginning to calculate how much they can bump up prices to get ready for it.

As usual, the minimum wage issue is fueling over-caffeinated partisan debate, with Republicans saying it will devastate mom-and-pop businesses and leave millions jobless. Democrats generally argue that it will boost the economy by putting more money in the hands of lower-paid consumers, who will turn around and spend it on the essentials of modern life.

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